European Banking Authority eyes new investment firm rules

Added 4th November 2016

The European Banking Authority (EBA) is seeking industry views on setting up a new prudential regime that is specifically tailored to the needs of investment firms.

European Banking Authority eyes new investment firm rules

The consultation, which runs until 2 February 2017, is looking for technical advice on developing a single, harmonised set of requirements that are reasonably simple, proportionate, and more relevant to the nature of investment business.

Risk rating

The EBA is proposing that the ongoing capital requirements should be calculated based on capital factors (K-factors) that are attributed to one of two broad types of risks; namely risk to customers and risk to market integrity and liquidity.

Therefore, firms that pose greater risk to customers and markets should have higher capital requirements than those that pose less risk.

Firms that pose similar risk to customers and markets but with more own risk should hold more capital than those with less own risk.

The discussion paper covers the most important aspects related to the new prudential requirements for investment firms, including three possible alternatives to set minimum liquidity requirements.

All three alternatives aim at addressing the liquidity profile of investment firms in a more appropriate way than the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR).

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Kirsten Hastings

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Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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